Sunday, June 6, 2010

TILA Penalties for Failure to Record Assignments

Hugh Wood, Atlanta, GA

While a lender must record its post-foreclosure Deed Under Power of Sale (“DUP”), within 90 days of the sale, [ 1 ] there seems to be no penalty for failure to record. [ 2 ] That would also be true for failure to record the underlying assignment(s) of the Deed to Secure Debt. The failure to record an assignment puts the foreclosing lender in the problem proving the its chain of title if challenged. Since few are challenged and Georgia has an overwhelmingly creditor bias in its law, the challenge generally amounts to nothing (unless the lender truly can not find the assignment).

While there are few Georgia cases worth mentioning in this area, a recent amendment to the The Helping Families Save Their Homes Act of 2009 contains an unwanted and little known penalty for lender’s failure to “notify” the borrower of assignments. [ 3 ] Buried in the act is a new Truth in Lending (“TILA”) violation for failure to provide the borrower with notice of the new owner of the mortgage/deed to secure debt.

It appears to apply to assignments subsequent to May 21, 2010. The failure to notify contains the well known TILA penalties.

The federal assignment law states as follows:

SEC. 404. NOTIFICATION OF SALE OR TRANSFER OF MORTGAGE LOANS. (a) IN GENERAL.—Section 131 of the Truth in Lending Act (15 U.S.C. 1641) is amended by adding at the end the following:
NOTICE OF NEW CREDITOR.— ‘‘(1) IN GENERAL.—In addition to other disclosures required by this title, not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer, including—
(A) the identity, address, telephone number of the new creditor;
(B) the date of transfer;
(C) how to reach an agent or party having authority to act on behalf of the new creditor;
(D) the location of the place where transfer of ownership of the debt is recorded; and
(E) any other relevant information regarding the new creditor.
(2) DEFINITION.—As used in this subsection, the term ‘mortgage loan’ means any consumer credit transaction that is secured by the principal dwelling of a consumer.’’.
(b) PRIVATE RIGHT OF ACTION.—Section 130(a) of the Truth in Lending Act (15 U.S.C. 1640(a)) is amended by inserting ‘‘subsection (f) or (g) of section 131,’’ after ‘‘section 125,’’.

State law requires recording; the only penalty seems to be non-enforcement and loss of priority. [ 4 ] While this federal statute does not require recording, it does carry with it the specter of a private right of action against the lender under TILA, if the lender fails to provide notice to the borrow.

That TILA penalty seems to be an amount “equal to twice the amount of the finance charge imposed, but not less than $100 nor more than $1,000 [15 U.S.C. Section 1640(2)(a)].” [ 5 ]. Additionally, the borrower should be able to recover attorney’s fee under TILA, if the borrower prevails on his or her main TILA claim. That is, you have to prevail to get attorney’s fees.

The murky world of the “lost assignment,” continues to be frustrate borrowers and lenders. Whether there will ever be a nationwide mandatory recording requirement remains to be seen. Hopefully, this new TILA “penalty,” against lenders for failure to notify borrowers may go a long way toward cleaning up the “lost and missing assignment” mess.

Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
Phone: 404-633-4100
Fax: 404-633-0068

[ 1 ]

Current through the 2010 Legislative Session
O.C.G.A. § 44-14-160. Recording Of Foreclosure And Deed Under Power; Notations Of Sale In Records
Within 90 days of a foreclosure sale, all deeds under power shall be recorded by the holder of a deed to secure debt or a mortgage with the clerk of the superior court of the county or counties in which the foreclosed property is located. The clerk shall write in the margin of the page where the deed to secure debt or mortgage foreclosed upon is recorded the word 'foreclosed' and the deed book and page number on which is recorded the deed under power conveying the real property; provided, however, that, in counties where the clerk keeps the records affecting real estate on microfilm, the notation provided for in this Code section shall be made in the same manner in the index or other place where the clerk records transfers and cancellations of deeds to secure debt.
History. Amended by 2009 Ga. Laws 106, §1, eff. 7/1/2009.

[ 2 ]

The growing cottage industry of chasing unrecorded SD for $500 a piece went out in the last round of legislation over this recording statute.

[ 3 ]

It is not a federal requirement to “record,” but a federal requirement to give the borrower notice of the transfer to a new lender.

[ 4 ]

Title 44. PROPERTY
Article 1. RECORDING
Part 1. General Provisions
Current through the 2010 Legislative Session
O.C.G.A. § 44-2-1. Where And When Deeds Recorded; Priority As To Subsequent Deeds Taken Without Notice From Same Vendor
Every deed conveying lands shall be recorded in the office of the clerk of the superior court of the county where the land is located.
A deed may be recorded at any time; but a prior unrecorded deed loses its priority over a subsequent recorded deed from the same vendor when the purchaser takes such deed without notice of the existence of the prior deed.

& & &

O.C.G.A. § 44-2-6. Recording Bond For Title, Contracts, Transfers, And Assignments; Priority As To Subsequent Deeds Taken Without Notice From Same Vendor
Every bond for title, bond to reconvey realty, contract to sell or convey realty or any interest therein, and any and all transfers or assignments of realty shall be filed and recorded in the office of the clerk of the superior court of the county where the land referred to in the instrument is located. The filing and recording shall, from the date of filing, be notice of the interest and equity of the holder of the instrument in the property described therein.
The filing and recording may be made at any time; but such bond for title, bond to reconvey realty, contract to sell or convey realty or any interest therein, and any transfer or assignment of realty shall lose its priority over deeds, loan deeds, mortgages, bonds for titles, bonds to reconvey realty, contracts to sell or convey realty or any interest therein and any transfer or assignment of realty from the same vendor, obligor, transferor, or assignor which is executed subsequently but filed for record first and is taken without notice of the former instrument.

[ 5 ]

Remedies For Non-Compliance
TILA imposes specific statutory remedies available to a person who has entered into a contract that does not comply with the disclosure requirements. As discussed below, Business & Professions Code section 6203 prohibits arbitrators from awarding some of these remedies in the context of an arbitration proceeding.
Under TILA's statutory penalty provisions, a creditor can be liable to the consumer in an amount equal to twice the amount of the finance charge imposed, but not less than $100 nor more than $1,000 [15 U.S.C. Section 1640(2)(a)]. This statutory penalty may be recovered without proof of actual damages [Hinkle v. Rock Springs Natl. Bank (10th Cir. 1976) 538 F.2d 295, 297]. Once a court finds a violation, there is no discretion with regard to imposition of the penalties [Grant v. Imperial Motors (5th Cir. 1976].
TILA also provides that, in any consumer credit transaction in which a security interest on the consumer's principal dwelling is obtained, the consumer has the right to rescind the transaction until midnight of the third business day following consummation of the transaction or following delivery of the disclosure as required by the statute, whichever is later. A failure to disclose this right of rescission leaves the contract open to rescission by the consumer at any time up to three years after the date on which the transaction was consummated [15 U.S.C. 1635(f)]. Consequently, a security interest taken by an attorney pursuant to a retainer agreement may be avoided if the client was entitled to receive TILA disclosures and the requirements of the statute were not satisfied.
TILA also provides that a consumer may recover costs and attorneys fees incurred in prosecuting a TILA claim.
Mandatory Fee Arbitration Advisory The State Bar of California. 2010.



Anonymous said...

OCGA 44-14-162(b) only requires filing assignments "prior to the time of sale," not within 90 days afterward. It also does not specify any penalty.

Anonymous said...

Attorney Wood, you are a genius and a Godsend! I will be calling you tomorrow because this is an issue that nobody wants to deal with or go up against including attorneys. I applaud you for your bravery and brilliance in this blog.

Anonymous said...

I'm currently under contract for a foreclosed home. I have been through all of my steps to get to closing on time and we are now waiting on the bank that owns the property to file the foreclosure deed. When I turned utilities on, the power company said the utilities have been off for two years. Why in the world hasn't the bank already filed the foreclosure deed??? My family is technically homeless and living with relatives while we wait. The foreclosure attorney says check back in 1-2 weeks. Is there any recourse for my family? They would charge us interest for everyday after the set closing date if I were causing this delay. Please help!

Hugh Wood said...

To Anonymous of 9182012@1122, why don't you breach the contract of purchase and move somewhere else or (need a lawyer for this) bring a suit for specific performance? I can assure you, your current contract does not provide for the type of damages you are discussing - unless - it is merely breach for failure to deliver possession and you walk away without having to buy or pay more money.

Anonymous said...

Thanks for the fast response! I really want the house and I don't want to go through the wait of finding another. I am just wondering how I can get the bank/foreclosure attorney to move more quickly. If there is no penalty for filing the foreclosure deed late what good is this law?

Unknown said...

It also does not specify any penalty.
Bail Bondsman Richmond